ESCALATIONS: You Don’t Help a Drug Addict by Providing More Cheaper Heroin or Crack...

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ESCALATIONS: You Don’t Help a Drug Addict by Providing More Cheaper Heroin or Crack...
by Fred Cederholm | September 22, 2008


I’ve been thinking about escalations. Actually I’ve been thinking about unfolding events, fallacies, the rule of 10/90 or 90/10, bailouts, mission(s) accomplished, rising tabs, and the keystone cops. As I write this column, we are looking down the gun barrel of our third weekend (in a row) “make it or break it” crisis for the US financial system. At this point, there are few details as to what all will be added to Uncle $ugar’s growing list of guarantees. Future tax cash flows from US taxpayers will be committed to cover the financial losses of the rich, the well-born, and the powerful. There are even fewer guess-timates as to ultimate costs. But… once again smiling faces (botoxed to mask the true scowls of terror) will emerge. We will be told that “mission accomplished and crisis averted” again! Please read on.

You see by now the spin, the hype, and the fallacy of the “don’t worry, be happy, we’ve got it covered” song and dance should be old hat. Since a year ago this past August (when the powers that be were finally forced to acknowledge a crisis of debt was “rumbling” in the wings), we have witnessed the unraveling of our “debt only” driven economy.

Growth in consumption and spending came not from the value added numbers of domestic production. It came from the largesse of foreign benefactor/ lenders (to keep US/us buying their stuff), it came from additional “paper appreciation” of assets (which were more than likely already 100% financed), and it came from the “windfalls” of additionally minted “money” via the government’s printing presses and fresh lines of credit on newly issued credit cards. “Growth” was not that of wealth and prosperity, but growth of liabilities and obligations.

We were warned that if pre-emptive action were not taken, we might lapse into some recession contraction in 2008. This was a major fallacy because the real growth for most Americans in past decades was in net liabilities not in growth of net assets.

In one of my earliest economic classes I read that a 3rd world country was defined as a nation where 10% of the population owned or controlled 90% of the wealth/ assets. In the alternative the 90% had the 10% share. With what we have witnessed of late, I’m not so sure that it is even the wealthiest 10% of our own citizenry which now owns or controls 90% of this nation’s wealth or assets. Just where does that sorry state leave US/ us going forward?

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